O’Malley asks for consensus

Special session begins with speech

Wednesday, Oct. 31, 2007

Click here to enlarge this photo Staff Photo by Naomi Brookner House Minority Leader Anthony J. O’Donnell is at the center of the GOP opposition to O’Malley’s package of tax hikes the General Assembly is taking up in Annapolis during the special legislative session. Conferring with O’Donnell on Monday night are Dels. Patrick L. McDonough (left) and Christopher B. Shank (right). E-Mail This Article | Print This Story   O’Malley’s budget proposal * Revamp income tax brackets and increase tax on high-income filers. Raise $163 million a year. * Increase the earned income tax credit, returning $33 million a year to low-income families. * Increase the sales tax from 5 cents on the dollar to 6 cents. Raise $730 million a year. * Establish two permanent sales tax holidays. Cost of $13 million. * Give a $50 sales tax refund to households that earn up to $30,000 a year. Cost of $20 million a year. * Double the senior income tax exemption to $2,000 for people with incomes of less than $30,000 a year. Cost of $10 million a year. * Tax four services not taxed now: tanning salons, health clubs, massage services and real estate property management services. Raise $74 million a year. * Legalize slot machine gambling, raising about $700 million a year: 15,000 machines in Anne Arundel, Cecil, Allegany, Worcester counties and Baltimore city. Ninety percent to be paid out in winnings; $800 million to Education Trust Fund; $500 million to the licensees; $100 million to improving racetracks. * Double the cigarette tax to $2 per pack: Raise $170 million a year for health care expansion and deficit reduction. * Cut the state property tax from 11.2 cents per $100 of assessed value to 8.2 cents. Cost of $54 million a year. * Raise the corporate income tax from 7 percent to 8 percent. Raise $110 million a year, to be split evenly between higher education and transportation. * Eliminate ‘‘loophole” that lets corporations shield profits from state tax by moving money out of state, or to unprofitable subsidiaries. Raise $20 million a year. * Eliminate ‘‘loophole” that lets corporations sell property by avoiding state and local transfer taxes. Raise $16 million a year. * Increase the vehicle titling tax from 5 percent to 6 percent. Raise $166 million a year. * Peg the 23.5-cent gasoline tax to the cost of construction, projected at about 0.7 percent a year unless the index falls. Raise $63 million a year, for roads, bridges and transit. * Dedicate the rental car tax to the Transportation Trust Fund: $40 million a year.

Lobbyists and government officials jammed into a packed hearing room as budget committees of the Senate and the House of Delegates got a briefing from the legislature’s fiscal analysts.

On Monday night, the chambers heard O’Malley (D) call for consensus and a ‘‘One Maryland” approach from the General Assembly during a speech that convened the special legislative session aimed at resolving the state’s $1.5 billion budget deficit.

Acknowledging the high stakes, the governor appealed to lawmakers to compromise on several divisive elements of his deficit elimination plan.

‘‘On the common ground that exists between us, cooled by the clear waters of civil discourse, and breathing the honest air of mutual understanding, let us forge a consensus for the One Maryland we carry in our hearts and that all of our children deserve,” the governor said during the seven-minute speech.

To bridge the budget gap, O’Malley has proposed a broad revenue package. It includes a 20 percent increase in the sales tax, a 14 percent increase in the corporate income tax, a doubling of the cigarette tax, new tax brackets for the wealthiest Marylanders, the closure of two corporate tax ‘‘loopholes” and a 20 percent increase in the vehicle titling tax.

‘‘As prior generations might have warned us, there is no progress without sacrifice, there is no shared return without shared investment and there is no future better than this present, unless we are willing to work for it,” O’Malley told lawmakers.

Republicans were quick to lambaste the speech.

‘‘It was the flattest speech I’ve ever heard by a governor,” said Sen. Nancy Jacobs (R-Harford, Cecil) of Abingdon. ‘‘He paused for applause, and there was dead silence. I brought my notebook to take notes, but he didn’t say anything.”

Despite the call for compromise, Senate President Thomas V. Mike Miller Jr. warned that the governor has not yet achieved consensus on a key element of his proposal: legalizing slot machines.

O’Malley wants to put the issue of slots before voters in a referendum on the November 2008 ballot. His plan would place 15,000 terminals at five locations — one each in Allegany, Anne Arundel, Cecil and Worcester counties and Baltimore city — and eventually would raise about $700 million a year. Under the plan, both Laurel Park and Ocean Downs racetracks would be likely locations for slots parlors.

A referendum complicates passage of a slots bill in the Senate, said Miller, adding that he is personally opposed to a referendum but would support it.

‘‘I can get the bill through without a referendum,” said Miller (D-Calvert, Prince George’s) of Chesapeake Beach. ‘‘With a referendum, I can’t get 29 votes. So it’s going to be up to the governor dealing with the Democrats.”

House Republicans will pitch their own slots plan that they say eliminates the need for tax hikes by procuring money from license fees up-front.

The GOP’s plan recommends the same number of machines as O’Malley’s proposal, but places them at six unidentified sites across the state.

The GOP expects their plan would yield $850 million — half of the state’s projected deficit — in fiscal 2009, which begins July 1. When fully phased in, the Republican plan would raise $1.23 billion a year with $927 million going toward education.

As for the revenue measures, Senate Minority Leader David R. Brinkley questioned the need for lawmakers to act immediately.

‘‘He [O’Malley] had a session to make some of the changes he was talking about. He was given a pass ...,” said Brinkley (R-Frederick, Carroll) of New Market. ‘‘Earlier special sessions dealt with immediate crises that couldn’t wait. This isn’t one of them.”

Republicans have called on O’Malley to make more cuts in state spending.

Miller, too, has said more needs to be cut in state spending, but he has maintained that the resolution to the state’s fiscal crisis is cuts, slots and tax increases. On Monday, he asked the Senate GOP Caucus to reveal what cuts its members would make.

‘‘We both know that the phrase ‘limiting spending’ is a euphemism for making cuts to the state budget and depending on the ‘limit’ results in significant cuts,” Miller wrote. ‘‘For example, the 3.5 percent limit of spending suggested by some members of the General Assembly would require cuts of $770 million to the budget next year.”

Brinkley said the GOP caucus tried to present ‘‘a responsible alternative” during the regular session, which was voted down on a party line vote.

O’Malley made $280 million in cuts during the summer. And he announced a plan to freeze state education aid, saving about $200 million next year. Late last week, he dropped that plan in favor of holding education spending increases to at least 1 percent this year and pegging it to the consumer price index in the future.

On Monday afternoon, advocates on both sides of the tax debate staged rallies outside the State House.

About 300 people opposed to higher taxes called on legislators to slow the rate of spending growth and resist O’Malley’s call for tax hikes.

‘‘People are already out of money, and we don’t need any more taxes,” said Sen. Janet Greenip (R-Anne Arundel) of Crofton. ‘‘All we need is government to live within its means.”

Supporters of O’Malley’s plan, led by union members, countered with a smaller rally, arguing that state services cannot endure further cuts.

‘‘We’re already in a crisis mode in corrections,” said Jack Hughes, a correctional officer at Eastern Correctional Institution in Westover. ‘‘We need every dime we can get.”

Staff Writer Douglas Tallman contributed to this report.